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NGO AUDITS opportunities in Social Auditing

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NIRC of ICAI New Delhi 5th February, 2011 CA SUDHIR VARMA FCA; CIA (USA) 1. Transaction based audit 2. System / Risk based audit 3. Project based audit 4. – PowerPoint PPT presentation

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Title: NGO AUDITS opportunities in Social Auditing


1
NGO AUDITS opportunities in Social Auditing
  • NIRC of ICAI
  • New Delhi
  • 5th February, 2011

CA SUDHIR VARMA
FCA CIA (USA)
2
Types of Audit
  • 1. Transaction based audit
  • 2. System / Risk based audit
  • 3. Project based audit
  • 4. Donor based audit
  • 5. Efficiency audit
  • 6. Compliance / Statutory audit
  • - Income Tax
  • - FCRA
  • - Registering authority

3
Engagement
  • 1. Appointment by appropriate authority
  • 2. Engagement letter
  • 3. Scope of audit
  • 4. Reporting requirements
  • 5. Fee

4
Audit approach
  • 1. Knowledge of business
  • objects activities
  • 2. Audit objectives
  • 3. Audit plan
  • 4. Audit process
  • 5. Resources

5
Types of Audit
  • 1. Transaction based audit
  • 2. System / Risk based audit
  • 3. Compliance/Statutory audit

6
Project based audit
  • 1. Understand activity under the project
  • 2. Budget for the project
  • 3. Separate bank account / books of accounts
  • 4. Direct revenues from the project
  • - grants
  • - donations
  • - revenue incomes
  • 5. Direct project expenses nature
  • 6. Allocation of expenses to projects
  • 7. Projects utilization certificates

7
Donor based audit
  • 1. Donor sanction letter
  • 2. Terms Conditions
  • 3. Budget
  • 4. Reporting requirements

8
Efficiency audit
  • 1. Donors / Governing body / Trustees
  • 2. Verification of expenses beyond accounting
  • 3. External help of specialists
  • 4. Common sense / matured judgment
  • 5. Team leaders

9
Computerized Environment
  • 1. Size of NGO / No. of transactions
  • 2. Familiarity with software in use
  • 3. Assess software controls
  • 4. Use auditing software
  • 5. Remain abreast with technology

10
Statutory Compliances
  • 1. Income Tax Act
  • 2. FCRA / FEMA / RBI
  • 3. Registration laws
  • 4. Labour laws
  • 5. VAT / Service Tax
  • 6. Commercial laws
  • 7. Protection laws
  • 8. General laws

11
Social Audit
  • 1. This is more holistic than financial audit
  • 2. Social audit of program/organization
  • 3. Covers social performance of an activity,
    its relevance effectiveness
  • 4. Evaluates input resources vs beneficiary
    spread
  • 5. Audit process

12
Social Accounting
  • 1. Intent of organization
  • 2. Social book keeping accounting
  • 3. Define measurable parameters
  • 4. MIS reports on program implementation
  • 5. Program ledgers
  • 6. Procedures, formats with relevant information

13
Audit report
  • 1. Statutory formats
  • 2. Additional report to management
  • - scope
  • - methodology
  • - information verified
  • - limitations/disclaimers
  • - comments/observations
  • - recommendations
  • - actions taken/not taken on past
    recommendations

14
Audit report
  • 1. Report to donors
  • - scope
  • - methodology
  • - information verified
  • - limitations/disclaimers
  • - comments/observations
  • - variations from budgets/programs
  • - approvals of variations

15
Some issues
  • 1. Transfer from project to general funds
  • 2. Definition of program expenses vs
    administration expenses

16
Standards on Auditing
  • SA200 Basic Principles Governing an Audit
  • SA200A Objectives and scope of the Audit of
  • Financial Statements
  • SA210 Agreeing the terms of Audit Engagements
  • SA220 Quality Control for Audit Work
  • SA230 Audit Documentation
  • SA240 The Auditors Responsibility relating to
  • Fraud in an audit of Financial Statements
  • SA250 Consideration of Laws and Regulations in an
  • Audit of Financial Statements
  • SA260 Communication of Audit Matters with those
  • Charged with Governance

17
Standards on Auditing
  • SA299 Responsibility of Joint Auditors
  • SA300 Planning an audit of Financial Statements
  • SA320 Materiality in planning performing an
    audit
  • SA402 Audit Considerations Relating to Entities
  • Using Service Organizations
  • SA500 Audit Evidence
  • SA501 Audit Evidence Additional Consideration
  • for Specific Items
  • SA505 External Confirmations
  • SA510 Initial Engagements Opening Balances
  • SA520 Analytical Procedures
  • SA530 Audit Sampling

18
Auditing and assurance standards
  • SA540 Auditing Accounting Estimates, including
    fair
  • value Accounting Estimates related
  • Disclosures
  • SA550 Related Parties
  • SA560 Subsequent Events
  • SA570 Going Concern
  • SA580 Written Representations
  • SA600 Using the work of another Auditor
  • SA610 Using the work of an Internal Auditor
  • SA620 Using the Work of an Expert
  • SA700 The Auditors report on Financial
    Statements
  • SA710 Comparatives

19
  • Q A
  • Thank you
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